F.B.I. and Chinese Seize $500 Million of Counterfeit Software

The arrests and seizures came at a time American politicians and executives are pressing China to take strong measures to curb software piracy.

DAVID BARBOZA and STEVE LOHR

BEIJING, July 24 — The F.B.I. said Tuesday that a joint effort with the Chinese authorities had led to the arrest of 25 people and the seizing of more than $500 million worth of counterfeit Microsoft and Symantec software that was being made in China and distributed worldwide.

The arrests, according to industry executives, represented the most significant crackdown on software piracy.

“This is the biggest software counterfeiting organization we have ever seen by far,” Microsoft’s associate general counsel for worldwide piracy and counterfeiting issues, David Finn, said. “This is a real milestone.”

The arrests and seizures came at a time American politicians and executives are pressing China to take strong measures to curb software piracy.

The F.B.I. characterized the operation, code-named Summer Solstice and begun in 2005, as an “unprecedented cooperative effort” with China’s public security ministry. The bureau said it included multiple investigations that are continuing.

In the last couple of weeks, the operation led to the seizing by the Chinese government of 290,000 counterfeit discs and certificates of authenticity. The F.B.I. and the Chinese identified criminal organizations producing and distributing counterfeit software in both Shanghai and Shenzhen.

The Los Angeles field office of the F.B.I. conducted two dozen searches of suspected distributors of pirated software, seizing $2 million in software and $700,000 in other assets.

Microsoft’s 75-member antipiracy team had been tracking a Chinese syndicate since May 2001, when counterfeit discs of the Windows Millennium operating system were found in Southern California. Since the investigation began, Microsoft investigators have found 55,000 discs.

The Chinese syndicate thought to have been involved had 30 production lines. Based on its examination of the discs, Microsoft said a conservative estimate of the value of the software sold by the criminal group was $2 billion.

The illegal software included versions of Windows Vista, Office 2007, Office 2003, Windows XP and Windows Server, and it was produced in English, German, Italian, Chinese, Korean, Spanish, Dutch and Croatian.

Symantec is a leading publisher of security, antivirus and utility software.

Microsoft, in gathering evidence it later handed over to the F.B.I. and to Chinese authorities, said more than 1,000 people had notified the company and sent in counterfeit discs.

The suspects did not produce cheap copies, according to Microsoft. “This was a deluxe counterfeit software operation of a very high level,” Mr. Finn said. The discs were often sold at or near the price of legitimate software, he said, adding, “We’re not talking about selling these discs for a $1 on street corners.”

The consumers who sent in the pirated discs were apparently unaware they had purchased illegal software until a notification popped up on their screens — an antipiracy feature the company calls Microsoft Genuine Advantage. Mostly, Mr. Finn said, they were irate they had been sold pirated software. “We’ve never seen so much involvement by individual customers in the evidence-building process,” he said.

One group of criminal suspects was headed by Ma Kei Pei of Shanghai, who, the F.B.I., said was an experienced software pirate. In 2003, Mr. Ma was indicted in New York on criminal copyright and trademark violations in the production and distribution of counterfeit Microsoft products. He fled the United States and returned to China, where he continued as a big-time counterfeiter, according to the bureau.

This time, Mr. Ma “created and directed an international organization” to produce and sell counterfeit Symantec software, the F.B.I. said.

Mr. Ma and 10 accused co-conspirators were arrested, the F.B.I. said, and Chinese authorities froze $500,000 in his bank accounts and seized five properties he owned. The maximum sentence for software piracy in China is about seven years.

The bureau said it and the Chinese authorities had identified at least 14 major makers and distributors in Shenzhen of counterfeit Microsoft software.

China did not issue a separate statement. But the F.B.I. said that Chinese officials had seized more than 47,000 counterfeit Microsoft discs, and had arrested Wang Wenhua, Che Tingfeng and 12 others accused as conspirators.

The piracy ring, Mr. Finn said, had been the leading producer of high-grade counterfeit Microsoft products in recent years. As a result of the arrests, he said, “I expect to see a significant and appreciable effect on the amount of high-quality counterfeit software there is in the world.”

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